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Pre-recession wage inflation and the strength of the subsequent recovery

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  • Carl M. Campbell

Abstract

This study shows that the rate of wage inflation in the year before a recession is positively related to the rate of employment growth in the subsequent recovery. A possible explanation for this relationship is downward nominal wage rigidity. It is also found that the prior rate of wage inflation is not significantly related to the employment decline during the ensuing recession, suggesting that prior wage inflation has a greater impact on the strength of the recovery from a recession than on the severity of the recession.

Suggested Citation

  • Carl M. Campbell, 2017. "Pre-recession wage inflation and the strength of the subsequent recovery," Applied Economics Letters, Taylor & Francis Journals, vol. 24(18), pages 1331-1334, October.
    • Handle: RePEc:taf:apeclt:v:24:y:2017:i:18:p:1331-1334
    DOI: 10.1080/13504851.2016.1276264
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    References listed on IDEAS

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    1. Lebow David E & Saks Raven E & Wilson Beth Anne, 2003. "Downward Nominal Wage Rigidity: Evidence from the Employment Cost Index," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-30, October.
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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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